What Texas Federal Judge Ruling Means?
US District Judge Sean Jordan, appointed in 2019 by President Donald Trump, ruled that the Consumer Financial Protection Bureau (CFPB) did not have the authority to implement such a rule. According to the court decision, the CFPB overstepped the boundaries of the Fair Credit Reporting Act, which was last amended in 2003.
Judge Jordan stated the law does not permit the CFPB to erase medical debt from credit reports. He did note, however, that the agency can allow or encourage creditors to rely on other forms of consumer information when assessing creditworthiness.
How It Will Affect You?
The rule was finalized in January, just before President Biden left office. The Biden administration had estimated the policy would lead to the removal of nearly $50 billion in medical debt from credit reports. The rule aimed to help about 15 million Americans by potentially raising credit scores by an average of 20 points.
According to the CFPB’s internal analysis, the changes could have led to 22,000 additional approved mortgages annually, as medical debt would not be factored into credit decisions.
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Big Win for Trump Administration
The reversal comes amid broader efforts by Trump to review and undo regulations implemented by the Biden administration. Trump has worked through his Department of Government Efficiency to address what he calls “waste, fraud and abuse” in federal operations.The CFPB, originally created to protect consumers, has faced significant restructuring and staff reductions under Trump. In March, another federal judge stopped the administration from dismantling the agency.
Medical Debt and 2024 Campaign
Medical debt was a key issue in the 2024 presidential election. Former Vice President Kamala Harris had backed full medical debt erasure during her campaign. In January, Harris emphasized the need to support people facing financial burdens from health emergencies and committed to expanding forgiveness programs.
She stated, “No one should be denied economic opportunity because they got sick or experienced a medical emergency.” Harris also highlighted efforts to reduce medical debt and to stop harmful collection practices.
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Industry Reaction
Dan Smith, who leads the Consumer Data Industry Association, expressed support for the judge’s decision. Smith described the ruling as a move that protects the structure of the credit reporting system.
“This is the right outcome for protecting the integrity of the system,” Smith said in a statement reported by Reuters.
New Law Includes Medicaid Cuts
The judge’s decision comes just days after President Trump signed a large spending and tax package. The new law includes major cuts to Medicaid and introduces work requirements. These changes could remove health coverage from millions of Americans.
FAQs
Why did the federal judge reverse the medical debt rule?
The judge ruled that the CFPB lacked authority under the Fair Credit Reporting Act to erase medical debt from credit reports.
How many people were expected to benefit from the rule?
About 15 million Americans could have seen their credit scores rise due to the removal of $50 billion in medical debt.
